first majestic silver

Gold Sobs Over Good Jobs

Market Analyst & Author
August 7, 2016

Well Squire, going by the repeated ad nauseam "Top of the Hour" radio news post-payrolls release yesterday (Friday), 'twas nuthin' but "Jobs, Jobs, Jobs!", and apparently substantively so, the euphoric reporter giddily citing material gains in architectural design jobs, technology and engineering positions, managerial employment, all kinds of healthcare and hospital hiring and hospitality postings. Wow, talk about an audio indoctrination: "All we hear is radio ga ga..."--(Queen, '84)

'Course with all due immediacy at the point of the payrolls release, for Gold 'twas nuthin' but "Sobs, Sobs, Sobs!" as price plopped pell-mell 19 points from 1366 to 1347 ... in four seconds. How much slippage did your stops suffer? I know, let's not go there; besides, 'tis all about the fun and frivolity of futures trading, right? "When you're smiling..."--(Louis Armstrong, '29)

Now let's bring perspective to the fore, for 'twasn't all that bad. In fact for the week net-net, Gold gave back but eight points, settling yesterday at 1341. To be sure, Friday was Gold's third worse trading day of the year on both a points and percentage loss basis (-26 points, -1.89%). But 'tis important to understand technically from where Gold fell. The week's high was 1374: that was tickling the underbelly of Base Camp 1377, which as the Gold universe knows is a major hurdle which price shall eventually overcome. That said, such prior support is present resistance. All 'twould take was a catalyst for that area to again prove resistive, and it came fundamentally on Friday with the Department of Labor Statistic's announcing the creation of 255,000 July non-farm payrolls. Add that to the June's 292,000 creation and that's 547,000 net new payrolls. Is that a lot? You betcha, for in combing back through the data that comprises the Economic Barometer, since 1998 we've now had 218 monthly payroll reports, and in combining two-month totals, this latest combo ranks 12th highest (in the 95th percentile). That's a lotta payrolls.

Still for Gold, given its strong year-to-date performance as we go to the Weekly bars, such weakness just passed appears merely as "noise". And again, we've highlighted 1306 as a structural supporter:

Now naturally, 'tis the stock market that always gets all the ballyhoo, and despite the S&P 500 closing out the week at another record high (2183), its year-to-date performance remains comparably ho-hum to Gold's. Yes, over the last 21 days (one trading month), the track of the S&P500 (+2.5%) inclusive of yesterday clearly has overshadowed that for Gold (-1.9%) as we below see on the left. But by their respective year-to-date performances as shown on the right, we've the S&P +6.8% versus Gold +26.5%. (And as for the stock market being "comparably ho-hum", it surely shan't so seem once its crash gets into full gear ... tick, tick, tick...). Here are those percentage tracks:

In fact, might all this jubilation over the amazing economy be somewhat short-sighted? We think so. For in anticipating Squire's next question, how come the Econ Baro didn't soar yesterday given another massive injection of payrolls creation? Answer: there's more to the economy than merely issuing payroll checks. And in just now checking the earnings of the S&P500, did you know that 51 of its components are posting negative trailing twelve months earnings (which for you WestPalmBeachers down there means that 10% of the companies in the S&P500 lost money)? The first thing to go when yer company's losing' dough is ... You! Specific to the Baro, the strong payrolls creation was offset by incoming reports this past week showing the second largest drop in consumer credit in the last eight months, slowing in both the Institute for Supply Management's manufacturing and services indices, further declines in both construction spending and factory orders, an increase in the trade deficit, and personal income missing its consensus exception. Jobs may be great, but if their dough ain't enough to keep you on the go, this is the resulting Baro:

One hopes the members of the Federal Open Market Committee are tuned into all this economic angst that they indeed are not horsing about in their blinders focused only on jobs. As we all know, 'tis assumed virtually 'round the financial world that the FOMC's next rate move can only be "up". That said, we caught the tail-end of an interviewee on Bloomy radio, the analyst seeing the Fed actually knocking the Funds rate from .50% back down to .25% come the December meeting. Again, we too wouldn't be surprised to see them rescind, especially should the PPPT (political plunge protection team) not be able to keep the S&P aloft through 08 November, (StateSide election day). As the FinTimes pitched a John Authers piece on Thursday, "US stocks cannot escape gravity forever." (And our "live" price/earnings ratio for the S&P 500 per yesterday's components' settles? 40.3x -- two times too high).

Meanwhile this past Tuesday down under in the mining country of Australia, the Reserve Bank set its key interest rate to a record low 1.5%, given the non-inflationary aspects of flat wage growth, falling income per capita, and weak business investment. 'Course, not to be outdone by their kinship country in the south, the Bank of England's Monetary Policy Committee halved its Official Bank Rate to a record low .25%, its first cut since March 2009, whilst cranking up the sterling tumblers on its pounds presser to the tune of £70 billion in the wake of deteriorating business forecasts and consumer confidence. And to the north, the Royal Bank of Scotland put in a £1 billion quarterly loss, bringing its year-to-date loss to -£2 billion. "Bangers an' pints all 'round, please!" Sheesh. Pass us the Gold, please.

Ahhhh, that's more like it. Indeed below in the two-panel graphic, at left we've Gold's daily bars for the past three months-to-date; the baby blue dots represent the consistency at each day's reading of the 21-day linear regression trend, and of interest are these "Baby Blues" of late not having continued their descent toward the -80% level, (the "rule" being their normally swinging between +80% and -80%). Then at right in Gold's 10-day Market Profile, the three overhead resistors and two underlying supporters stand stark:

As for the same drill with Sister Silver, her daily bars (left) appear to have a bit less downside cushion compared to that for Gold, as she presently sits on her last material profile supporter (right) at 19.70:

Finally, we've these couple of quips as regards Gold's eternal hard asset appeal:

■ Last Monday found the 3rd US Circuit Court of Appeals ruling in favour of the U.S. (isn't that arguably a bit of litigated bias?) as regards those infamous 10 "double eagle" $20 Gold coins ostensibly owned by a family in Philadelphia. Valued at several million dollars apiece, the court has now deemed them to be U.S. government property, the family unfortunately in receipt of "stolen goods", if you will. Oh doth the U.S. love its hard Gold: remember during the "sequester" of 2013 when asked if the U.S. Treasury would offer up some Gold for the cause? "Oops, forget we asked..."

■ And have a hack at this one: how 'bout that $72 million worth of bitsh*t which "vanished" from Hong Kong's Bitfinex Exchange, sending the digital currentcrap into a 23% nosedive last Tuesday? "Rob, Rob, Rob!" But how the heck does one "steal" 120,000 units of an abstract something? Moreover, why is a physical exchange needed for something that doesn't actually exist? Or maybe there isn't one? Thank goodness StateSide Gold has a physical home!

Mark Mead Baillie

Mark Mead Baillie has had an extensive business career beginning in banking and financial services for two years with Banque Nationale de Paris to corporate research for three years at Barclays Bank and then for six years as an analyst and corporate lender with Société Générale.
For the last 22 years he has expanded his financial expertise by creating his own financial services company, de Meadville International, which comprehensively follows his BEGOS complex of markets (Bond/Euro/Gold/Oil/S&P) and the trading of the futures therein. He is recognized within the financial community of demonstrating creative technical skills that surpass industry standards toward making highly informed market assessments and his work is featured in Merrill Lynch Wealth Management client presentations.  He has adapted such skills into becoming the popular author each week of the prolific “The Gold Update” and is known in the financial website community as “mmb” and “deMeadville”.
Mr. Baillie holds a BS in Business from the University of Southern California and an MBA in Finance from Golden Gate University.

Goldschläger and Goldwasser are liqueurs containing pure gold flakes.
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